Incentives to TPAs against consumer: Bombay HC

MUMBAI: The Bombay high court on Monday said insurance companies that give incentives to third party administrators (TPAs) to reduce claims work against consumer interest. Insurance regulator IRDA told the court that if it comes across such companies it shall take them to task.

Hearing a PIL, a division bench of Chief Justice Mohit Shah and Justice Anoop Mohta allowed IRDA to finalize its draft regulations . The bench said the issue of giving more powers to the ombudsman, including imposing penalties, and specifying standard package rates in the policy document could be taken up later by issuing circulars.

The PIL was filed by Gaurang Damani last year. It highlighted the plight of 7 crore consumers paying Rs 13,000crore annually as medical insurance after TPAs stopped offering cashless mediclaim benefits. It focused on the absence of regulations to govern the industry. IRDA in June 2012 published draft regulations in response to the HC's order.

TPAs should process claims, not settle: PIL

A PIL filed by Gaurang Damani said that third party administrators (TPAs) are supposed to process claims, instead they're settlings claims. "In practice the insurance company offers incentives to TPAs depending on the amount of claim reduced ,'' he said. There's no clarity on what amount a consumer will get for his claim, he added.

Justice Mohit Shah said, "If given incentives, TPAs will be biased in favour of insurers . There is nothing wrong in TPAs being given a percentage of the premium but if incentive is given to reduce percentage of claim then there will always be a conflict of interest.''

IRDA member (non-life ) M Ramaprasad said it was logically not correct for TPAs to be paid incentives. "If we find such instances, we shall take such companies to task.''

He said the overall picture was quite satisfactory and not as dismal as Damani claimed. He said in 2011-12 , 37lakh claims were lodged, of which 31lakh were settled within a month and only 8% were outstanding beyond six months. Ramaprasad said that out of 9,000 complaints to the ombudsman, 2,200 were settled and 6,000 were rejected for not falling within the purview of grievance guidelines . He said IRDA had received some 1,000 responses to the draft regulations and was taking them very seriously .